Destin Company recently acquired several businesses and recognized goodwill in e

Question

Destin Company recently acquired several businesses and recognized goodwill in each acquisition. Destin has allocated the resulting goodwill to its three reporting units: Sand Dollar, Salty Dog, and Baytowne. Destin opts to skip the qualitative assessment and therefore performs a quantitative goodwill impairment review annually In its current year assessment of goodwill, Destin provides the following individual asset and liability values for each reporting unit Carrying Amounts Fair Values Sand Dollar Tangible assets Trademark Customer list Goodwil1 Liabilities Salty Dog Tangible assets Unpatented technology Licenses Goodwil1 Baytowne Tangible assets Unpatented technology Copyrights Goodwil1 247,000 187,000 134,250 189,750 (53,750) 261,900 164,400 153,550 (53, 750) 294, 000 194,000 131,500 196,700 294,000 125,250 142,500 201,300 156,750 108,000 182,000 74,000 94,000 The fair values for each reporting unit (including goodwill) are $694,850 for Sand Dollar, $766,750 for Salty Dog, and $754,050 for Baytowne. To date, Destin has reported no goodwill impairments. a. Determine which of Destin's reporting units require both steps to test for goodwill impairment. b. How much goodwill impairment should Destin report this year?

Explanation / Answer

Note : Steps to test the goodwill impairment :

When  Implied value of goodwill is more than Carrying value of goodwill than there will be no Impairment loss.

where , Implied value of goodwill = Fair value of whole unit - Fair value of indentifiablenet net assets

Answer a

Answer 2

Computation of Amount of Goodwill impairment

Amount of goodwill impairment that Destin should report = Impairment loss of Sand Dollor unit = $21,000

Reporting units Total Fair Value ($) Total Carrying Amount ($) Position Unit required steps for goodwill impairmnt Sand Dollar 694,850 704,250 fair vlaue < carrying amount Yes Salty Dog 766,750 816,200 fair vlaue < carrying amount Yes Bay towne 754,050 350,000 fair vlaue > carrying amount No

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.